Family Law and the Family Farm

The breakdown of a marriage is ordinarily devastating on many fronts but it has special consequences when it involves an intergenerational family business such as the family farm.

A typical farming business is owned and operated by a couple in partnership, often with and between their various children and their spouses. The farm has been in the family for generations and work is done by various family members according to their capacity and it is usually hoped that the farm will be passed from one generation to the next.

The farm is much more than real estate it is a shared home, heritage and livelihood.

Arrangements between family members are often informal, promises are made and revised and there are “unspoken understandings”.

Family members regularly spend many years working on and improving the farm without being paid a formal wage on the expectation that one day they will inherit the family business.

Oftentimes numerous family members in one way or another contribute to other investments designed to benefit the family as a whole.

Homes can be built on the farm where the land itself is not owned by the son or daughter (and their spouse) who is building a home. They rely on an expectation, unspoken promises or informal understandings that one day they will own the land as well.

This raises very complex questions that need to be answered in order to assess a departing spouse’s entitlement.

The difficult issue is how to balance the divergent interests of usually several families over two or three generations and the proper entitlement of the departing spouse.

All property proceedings whether or not the parties are formally married or in a de facto relationship involve a process that identifies the parties assets and liabilities , their respective financial and non-financial contributions and whether or not a further adjustment is necessary to one or the other because they have greater future needs. The final step of this process requires a court to make orders that are “just and equitable”, relevant in working out whether or not the family farm needs to be sold to enable the departing spouse to obtain their entitlement.

This is where the trouble starts as it is often the case that there are business relationships between various family members and shared assets.

It is also common that the farming property itself as well as other family assets are owned by a company/trust arrangement established as part of succession planning many years earlier.

This means that any arrangements to divide these assets between the husband and wife will by necessity drag in other family members.

These family members will also be very keen to protect their interests in this property and not have assets potentially sold out from underneath them.

The legal and practical issues are very complex and involve such things as:

Inheritances and/or intergenerational succession planning.

Life estates and other equitable interests of the extended family.

Rural properties that have been run as family partnerships over generations.

Family partnerships that involve several other properties

The sale of part or all of the farming property to realise the interest of the departing spouse but also affecting extended family members.

Valuation issues.

The sale of rural property that significantly reduces the income and viability of the farming enterprise as a whole.

The disentangling of complex corporate structures established over many years and generations.

Tax.

It is difficult, time-consuming and expensive to navigate through the minefield that a marriage breakdown can create for an intergenerational farming business. It requires significant legal and accountancy expertise to resolve these issues as quickly and cost effectively as possible.

Familiarity with the complex operation of the law in such matters is essential to avoid an expensive legal debacle where outcomes often cannot be confidently predicted.

The last thing you want is to end up in the Family Court not only with your former spouse but with other members of your extended family such as your siblings and parents who are only there because they need to protect their interests.

Have further questions or enquiries? Get in touch today.

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